Decision making has a key role in determining the success of an organization, given that resources and other important parts of a company are influenced by decisions made. The speed with which decisions can be made is of essence as it directly determines the rate of duty execution thus; it is paramount for decisions to be timely. This has elicited debate as to which strategy of decision making between decentralized or centralized is better for organizations to adopt.
The management of AES for example, is inclined to the decentralized strategy of decision making. Though the organization stresses on four core values that must be followed by everybody, each department has the freedom of choosing which method to use in executing their duties bearing in mind the core values (O’Reilly & Pferffer 2000).
Human resource department is not part of the organization’s strategy of decision making instead, employees are supposed to come up with ways of tackling issues in their line of duty. It is the responsibility of the employees to organize for training sessions whenever they are faced with difficult situations or issues that they are not conversant with.
Through this, the employees of AES have learned to be responsible for their actions and they feel they are part of the people who will make the organization succeed and therefore, their level of productivity has increased. The strategy helps the organization in adapting fast to the dynamic business world and expedites the decision making process, as well as enhancing common set of values that are followed by each employee (O’Reilly & Pfeffer 2000).
Centralized decision making strategy does not provide for flexibility incase there are unforeseen changes in the business environment therefore, giving the opponents a competitive advantage in such instances. The easiness and speed of decision making that is associated with decentralized decision making strategy allows quick reaction to the dynamics of the business world, and that is what has helped AES to prosper.
When people work as a team, the average output of the organization is improved since team members are ready to help each other hence eliminating inefficiency. Decentralized strategy of decision making highly advocates for employees to work as a team hence increasing productivity (Ariunaa 2010).
Different individuals have knowledge in different issues therefore, incorporating them in the decision making process ensures that high value decisions are made. On the same note, decentralized decision making strategy allows employees of various departments to use the experience they might have regarding their department or apply the knowledge they have to run and upgrade these sections. This ensures that the latest knowledge is used to run any given department thus, uphosslding efficiency in production.
In conjunction with that, employees are able to change the way they carry out some duties without necessarily waiting for approval from the top management, which sometimes takes long thus, increasing their efficiency.
It should be noted that it is easier for a person to discover his or her area of weakness and change it rather than waiting for the authorities to correct the same (Griffin 2010). Additionally, decentralized strategy makes use of division and specialization of labor which ensures that each employee performs to his or her best thus, taking advantage of wide expertise of the employees.
Furthermore, sluggishness of business operations is avoided in decentralized strategy as opposed to centralized strategy where decision making process may take a long duration because the top management has to meet and make decisions.
As far as decentralized strategy is concerned, a problem once discovered can easily be managed and normal operations resume without delay because the people who are supposed to make decisions are easily accessed (Griffin 2010). If a mistake occurs in decision making process, the whole system is not broken down if the organization uses decentralized strategy since only one department gets affected, while in centralized strategy the whole process can easily be brought to a halt by a single mistake.
On the other hand, decentralized strategy has its setbacks that can sometimes hinder operations if not taken care of. To begin with, given the diverse views that people may have, it sometimes becomes difficult to make these people agree on one idea regarding certain issues and this may annoy those whose ideas do not carry the day therefore reducing their morale at work (Ariunaa 2010).
On the same note, it is very easy for the organization to lose focus on the core values if employees are given too much freedom to do what they think is right, because the tendency of getting out of line is high.
Therefore, it is advantageous if an organization decentralizes some of the decision making process but centralizes the implementation of the core values and the promotion of organizational culture and mission.
Each department needs some level of freedom to solve its own problems as the people there have the first hand information of what affects them. On top of that, employees feel valued if they are involved in the decision making process and they will increase their efficiency which in turn increases the general output of the company (Griffin 2010).
Ariunaa, L. (2010). Fiscal Federalism and Decentralization in Mongolia. Potsdam: Universitatsverlag Potsdam.
Griffin, W. R. (2010). Management. Stanford: Cengage Learning.
O’Reilly, A. C., & Pfeffer, J. (2000). Hidden Value. Boston: Harvard Business School Press.